Article excerpt

Byline: Mark Basch

Louisiana-based OCA, which began last week trading at $4.04, dropped as low as $1.38 by Friday after saying in a Securities and Exchange Commission filing Tuesday that it "has identified certain errors" in its financial reports for the first three quarters of 2004. The company still has not filed its 2004 annual report.

OCA, then known as Orthodontic Centers of America and headquartered in Ponte Vedra Beach, went public at $2.75 in 1994 (adjusted for splits) and traded as high as $35.31 in Sept. 2000. Last week's fall sent the stock below its IPO price for the first time.

The company, which manages orthodontist practices, spent its first decade as a public company defending its complex accounting procedures for recording patient revenue. OCA had been recording it based on formulas related to a patient's contract, rather than on actual payments. In an effort to satisfy investors concerns about that method, it changed its procedures last year and now records revenue according to cash paid by patients.

But OCA spooked investors again last week with its announcement that its patient receivables for the first three quarters last year were "overstated by material amounts."

The SEC filing said OCA may be in default of its credit facility because of its accounting problems. It also said the company is curtailing plans to expand with new orthodontist centers because of cash constraints.

"Our core business remains strong and we are fully committed to ensuring that our affiliated practices have the services and support they need to continue providing high quality care to their patients," said a statement by Chief Executive Officer Bart Palmisano Sr.

Palmisano personally made a $2 million unsecured loan to the company to ensure it has enough liquidity. …